By Charles Denison
The Tower (Grosse Pointe, Michigan)
Perhaps the most important financial issue to young people in the upcoming presidential election is the rising costs of higher education. With the dramatic shift in the U.S. economy from low-skill manufacturing jobs to higher skill positions, some form of college education is required to join the middle class.
The candidate who has made the most noise when it comes to bringing down the cost of college is self-described democratic socialist Bernie Sanders. His plan to combat the issue is to join the ranks of Germany, France, Finland, Sweden and Norway in offering free public college to all students.
The amount students owe in college tuition is astounding. Student debt in the United States is $1.2 trillion. Approximately $100 billion of student loans are dished out per year according to CNBC, and since 1985, college tuition has risen 500 percent.
To put some perspective on these numbers, in-state tuition at the University of Michigan is between $14,000 and $16,000 per year.That does not include housing, textbooks and personal charges, far outpacing the rate of inflation. In 1999, tuition costs were between $6,000 and $7,000 dollars.
Out-of-state tuition and fees for public college have risen to such ridiculous rates that it would be theoretically cheaper to study in one of the aforementioned countries in Europe.
The reason for this exponential increase in costs can be blamed on the free market, as colleges spend more and more to attract top-notch faculty and students. Contrary to common sense, however, between 2006 and 2011, the United States experienced a steady rise in enrollment rates despite climbing tuition costs.
Nevertheless, the American family may have reached its point of elasticity as college enrollment has decreased in the past few years as enrollment in all sectors in 2015 decreased by 1.7 percent, according to National Student Clearinghouse Research Center. If this educational arms race continues at the same rate, then enrollment may continue to dip as average Americans can no longer afford the mounting debt.
Although free tuition such as that proposed by Sanders should increase the enrollment in public colleges, there are statistics that suggest the opposite. The OECD has the number of 25-34 year olds in the United States with a college education at 45 percent in the year 2013. The only country that offers free tuition with a higher percent of educated young adults is Norway, with 47 percent.
Opponents of the Sanders plan often cite these facts as proof that free tuition does not affect workforce education. However, these numbers can be deceiving. Comparing these percentages together completely disregards the amount of growth some European countries have experienced.
The U.S. saw a 7 percent rise in college-educated young adults between 2000-2013, while countries such as Norway have increased this number by as much as 12 percent. These statistics also fail to incorporate the static enrollment rates in the U.S since 2011. To make a long story short, a less-educated workforce in the U.S. isn’t a problem yet, but it could be if trends continue.
The question voters should be asking Sanders is: how do you plan to pay for spotting every American public college student on their tuition? After all, the cost according to the Sanders campis approximately $70 billion dollars per year.
Sanders wants Wall Street to pick up the tab by putting a tax on speculation. Sanders claims this tax is essentially a two-in-one solution: it makes college free and also deters risky Wall Street transactions. He also proposes a 0.5 percent tax on stocks and a 0.1 percent tax on bonds. This would make the cost of investing more expensive, while simultaneously disincentivizing what economists perceive as unproductive trading.
No one really knows how much revenue such a tax would yield due to the uncertainty on how the tax would affect the market. So until the tax is imposed, it’s a bit of a shot in the dark whether or not Wall Street will cover the cost of free public college.
The importance of a college education in today’s economic climate cannot be overestimated. Although the Sanders plan may not be the concrete solution students are looking for, at least he is addressing the problem. Instead of focusing on who lied about what and whether or not someone is a choke artist, voters should refocus their attention on the issues, like the $1.2 trillion dollars in student debt that young people are on the hook for.
Photo Credit: The Tower